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Lawyer ‘devastated’ after 28-year employee took $3M

Real estate lawyer James Naumovich says he couldn’t have known his law clerk of 28 years would start diverting millions in client money held in trust.

So when he found out a couple of years ago that Gina Kioussis had diverted $3 million for her own use, he was “devastated,” according to the judge who sentenced the clerk in 2011.

Last week, Naumovich’s lawyer and counsel for the Law Society of Upper Canada made a joint submission to penalize him with a two-month suspension for failing to supervise his former employee. A hearing panel may also order Naumovich to pay costs.

“Mr. Naumovich described Mrs. Kioussis as a trusted employee who had unfettered access to all his books, records, cheques, and accounts.

He considered her not just an employee but an associate, a friend, and a member of his extended family. He socialized with Mrs. Kioussis and her family,” said Ontario Court Justice Rebecca Rutherford in handing Kioussis a conditional sentence of two years less a day in November 2011.

A law society hearing panel, chaired by Alan Gold, listened last week as Naumovich’s lawyer Alfred Schorr described what he said was his client’s mistake.

“What Mr. Naumovich failed to do — and this is a lesson for everyone — he didn’t look at his bank statements. He didn’t look at his cancelled cheques at any time,” said Schorr.

Schorr noted Naumovich regrets the mistake. “He recognizes that that’s what exacerbated the fraudulent activities because it could have been detected. He feels badly about this.”

Law society counsel Andrea Waltman described the issue in the case as “a complete abdication of professional responsibility.”

Waltman called the case a complex one that has cost the law society “conservatively over $60,000.”

Schorr said Naumovich had hired an outside bookkeeper during the time the fraud happened but said the person was “either negligent or complicit” in the crime.

Naumovich was able to recover about $2.4 million of the diverted money. But he was the subject of 28 lawsuits launched by clients affected by the fraud.

When other lawyers hear about what happened to Naumovich, they fear it could happen to them as well, according to Schorr. But Gold didn’t like that argument. The law society doesn’t believe lawyers should think these things could happen to them “but for the grace of God,” he said. “This is not something to be expected.”

As soon as Naumovich received a call from a client about a mortgage that wasn’t discharged, he called police, wrote to the law society, and contacted the affected clients, his lawyer said. The law society agreed that Naumovich’s co-operation was a mitigating factor.

The only extenuating circumstance Waltman mentioned was the fact that Kioussis was a long-serving and trusted employee.

Kioussis pleaded guilty in court to fraud over $5,000. She told the court she stole the money to cover the health-care costs of her late husband and her mother.

Around the same time her husband fell seriously ill with progressive supranuclear palsy, her mother, who also lived with her, suffered a heart attack, the judge said.

“It was during this six-year time period that Mrs. Kioussis engaged in the deceitful act of stealing $607,424.60 from her employer in order to pay for the high health-care costs that were required for the care of both her husband and her mother,” wrote Rutherford in R. v. Kioussis.

“Mrs. Kioussis thought the scheme she embarked on would be simple and brief. She believed she could take money from her employer for health-care expenses for her husband and mother and pay Mr. Naumovich back quickly without having anyone affected by her actions. She was terribly wrong.”

The court described Kioussis, who was 64 at the time of her sentencing, as mentally fragile. “Mrs. Kioussis’ actions were not motivated by greed but by an inability to cope after her husband’s health deteriorated significantly,” wrote Rutherford.

“She suffered from major depression at the time and because of the pathological dependence she had formed on her husband during their lives together, she could only think of keeping him comfortable and alive at the time of his illness.”

The judge decided to allow Kioussis to serve her sentence in the community after two doctors testified about the consequences of separating her from her elderly mother.

“Both doctors express concern about Mrs. Kioussis’ emotional and physical health should she be separated from her mother,” wrote Rutherford.

“I am told that Mrs. Kioussis would feel incredible guilt for not being able to care for her mother. Both doctors opine the guilt Mrs. Kioussis would experience should she be separated from her mother could be emotionally and physically destructive to the point of self-harm.”

During Naumovich’s disciplinary hearing, Waltman said the law society wasn’t concerned about specific deterrence.

“The law society is satisfied that Naumovich has learned his lesson,” said Waltman, adding that the lawyer has also put new systems in place to avoid a similar situation.

But the ordeal has affected Naumovich’s health, his lawyer said. In fact, Rutherford noted in sentencing Kioussis that after finding out about the fraud, Naumovich “began to suffer from depression, he developed insomnia, and lost 30 pounds. The stress was compounded by the barrage of phone calls from angry clients that were affected by Mrs. Kioussis’ actions.”

I am shocked to read what has happened to Jim Naumovich. He has has handled legal matters for me over the last 25 years and it is a crime that he is treated like the perputrator not the victim. If his trusted employee took 3 million to look after her parents and 2.4 million was recovered after the fact it indicates that she was doing more than paying medical bills it looks like she was feathering her own nest for the future. Her penalty for her crime was basically non existant,. wherass \Mr Naumovich may have broken the due diligence rules of the law society his only mistake he made was to trust a long time employee to do her job and free him up to be the good, honest lawyer that he is.Mr Naumovic reputation is still intact but the criminal is slapped on the wrist after the Judge believes her sob story and she does not even have to pay the court cost.

"she was feathering her own nest for the future"If you read the Law Society's decision on this case at you will see that "his law clerk was able to divert $3 million more or less of client trust monies to her own use or the use of her relatives and their related companies" Their related companies? Feathering several nests by the sounds of it.

I have been Mr. Naumovich's bookkeeper since shortly after the fraud came to light, and from my initial meeting with him, my instructions were to co-operate and disclose any and all information requested by the police, law society and forensic auditors. I have only seen Mr. Naumovich as an honest, hard working and sincere person, who has suffered a great deal by his employee's actions. I have been a bookkeeper for over 25 years and legal assistant for over 15 year. I find it deplorable that the assistant received such a tap on the wrist and the bookkeeper received no punishment at all. I agree with the other comments as well regarding the fraudster being treated with leniency while punishment for the victim is considered. The ones who commit the fraud should be the ones to pay ALL costs related thereto.

Exactly. I am one of the victims. I suffered the depression and extreme anguish as I was sued by the bank for the money that Naumovich's office received but never transferred to the bank. I spent a lot of money to fend off the bank's lawyers for many years and eventually had to move out of the country. This fraud completely changed my life and very nearly ruined me and my family both emotionally and financially while Naumovich avoided paying the real victims by promptly declaring a bankruptcy and moving assets off-shore so please spare me the sympathy-for-the-poor-lawyer comments.

Mr. Naumovich is a victim, but fell into the trap of trusting his associate, rather than tending his business. In the end, he is responsible for the breach of trust, and is being held responsible. The perpetrator of the fraud is being treated much more leniently, and that is wrong, but to bring her mental health, demonstrably shakey, into the sentencing, is also wrong. Let her pay the costs.

Typical response to white collar crime. "Oh she'll feel guilty if she can't take care of her mother so let's not send her to jail". She took $3M that didn't belong to her but the lawyer is the bad guy. Let's take away his right to earn a living. Wow.

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